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On top of the price, the buyer would then have to pay £700 + VAT in auction house fees as well as four per cent stamp duty before beginning the conversion.

Planning permission was granted last year for the garage to be demolished, and replaced with a single storey plus basement dwelling.

It is tucked at the end of an alleyway between Lamont Road and the King's Road in Chelsea, one of London's most desirable areas

The outbuilding is described as being on an 'irregular shaped, broadly level site' which extends to 538 sq ft, or just 0.013 acres

When completed, it will have two bedrooms, one with en-suite, living room, kitchen/ diner, toilet, guest shower room and patio.

The garage will be sold on October 30 at Allsop's auction in The Cumberland Hotel near Marble Arch.

It could be the latest outrageous price paid in London for a garage or small area of space as the capital deals with its housing crisis.

The garage will be sold to potential developers on October 30 at Allsop's auction in The Cumberland Hotel near Marble Arch

Planning permission was granted last year for the garage to be demolished, and replaced with a single storey plus basement dwelling

A row of three garages in Wandsworth were sold for £500,000 in July while six garages in Parsons Green sold for £700,000 in May.

Also in May, a courtyard garden in Chelsea which had no planning permission was sold for £84,000.

The price guide for the Chelsea garage is only slightly less than Category A listed Galloway House, Dumfries and Galloway, which boasts 36 bedrooms, 20 acres of land and will go on the market for £595,000.

Gary Murphy, an auctioneer at Allsop, said: 'This could be the highest price paid for a single garage in the capital, but then again it does have planning permission for a house.

'And what a great opportunity to build your own home just off Chelsea's, King's Road - one of the most desirable locations in London.'

When completed, it will have two bedrooms, one with en-suite, living room, kitchen/ diner, toilet, guest shower room and patio

The garage is located on land behind these two houses and on top of the price, the buyer would then have to pay £700 + VAT in fees

It could be the latest outrageous price paid in London for a garage or small area of space as the capital deals with its housing crisis

Figures released this week by the Office for National Statistics show house prices in London have risen by more than 20 per cent in the past year.

The average home, in London, now costs £514,000.

Zoopla, the property website, says the average house price on Lamont Road next to the garage, is now £3.5 million - up £507,000 on the past 12 months and £1.1 million in the past five years.

A report from National Housing Federation, also released this week, claim only Londoners earning more than £100,000 can afford a typical mortgage.

A row of three garages in Wandsworth were sold for £500,000 in July, even though they came without planning permission

This garage located near the Duke and Duchess of Cambridge's home at Kensington Palace was put up for sale for £500,000

This is more than three times the average salary.

When told about the garage, Dave Smith, external affairs manager for London at the NHF, reiterated the need to combat the crisis.

He said: 'The effects of London's housing crisis are being felt by millions of hard working people every day and action must be taken now to tackle the capital's out of control housing costs.

'We urgently need an ambitious, long term plan and for politicians from all sides to commit to ending the housing crisis within a generation.'

With 36 bedrooms, 20 acres of land and stunning views out to the Irish Sea, Galloway House in Sorbie, Dumfries and Galloway, will go on the market for just £595,000 – only slightly more than the garage in Chelsea

This four-bedroom property in Skipton, North Yorkshire, is now on the market for £500,000, significantly less than the garage in Chelsea

With a budget of £550,000 you could also buy this sprawling four-bedroom detached house in Dunfermline, Fife